I have installed the 4.1 update. When I follow the above instructions, the new settings do not appear in preferences. There is nothing listed under "Interface, Show Touches." About Draw in Preferences even shows the 4.1 update active. I even had a pop-up window when i opened the app showing me how to use the new features in 4.1. And yet, the settings are not available to me. Have you heard of this one/
Additionally, yes, I did see that a stroke must be made in the app before the Preference shows up. I have made multiple strokes. It still isn't there.
Did find a fix myself. After I did the update, made strokes with the pencil, completely quit out of the app on my iPad, then opened the app again, I finally was able to see the new options in Preferences.
I was just going to suggest trying that.
Glad you found it.